On Tuesday, the Wall Street Journal reported that international companies have begun accelerating their withdrawal from the Chinese special administrative region of Hong Kong as Beijing increasingly asserts its control over the area.
For four straight years in a row, the number of US corporations operating in the region has declined, reaching 1,258 in June of 2022. According to government data the news outlet cited, that was the fewest operating in the region since 2004.
In addition, for the first time in three decades, Hong Kong had fewer US corporations operating there with a regional headquarters than there were Chinese mainland companies.
In an interview with the newspaper, Simon Cartledge, who runs a research and publishing company in the region said that for companies, operating in Hong Kong was previously “a fairly risk-free matter,” however, “Now, it’s not a risk-free place. There are question marks over everything.”
Hong Kong was previously a British colony. It later became a dependent territory of the United Kingdom for 156 years. In 1997, it was returned to the Chinese government. In an agreement governing the handover, between Beijing and London, it was agreed that until at least 2047 the territory would be self-ruled, with judicial independence.
The territory was until recently, among the most popular regions for Western corporate majors to set up regional headquarters, due to its combination of Western-style business regulation, combined with its proximity to mainland China.
In 2020, Beijing asserted its control over the region when it passed a national security law which would allow Beijing to extradite criminals from Hong Kong to the mainland. The law also codified crimes within the territory such as secession, subversion, terrorism, and collusion with foreign actors.
As China passed the new measures, it also intensified its crackdown on foreign businesses. Simultaneously, there was an economic slowdown on the mainland, which combined with growing tensions between Beijing and Washington to make the region appear less hospitable to businesses. Together it has all led an increasing number of foreign businesses to relocate out of Honk Kong due to fears of deteriorating business conditions.
Rob Jesudason, the founder of Serendipity Capital, who left the region for Singapore in 2019, said in an interview, “Hong Kong is now seen as an extension of China.”
Australian bank Westpac has relocated out of Hong Kong, and National Australia Bank is reported to be planning its exit. Currently three US and British due-diligence companies are also reportedly moving their employees out of the territory in preparation to relocate as well. One of Canada’s largest pension funds, the Ontario Teacher’s Pension Plan, has reportedly closed the doors of its stock-picking operations based out of Hong Kong, and TTM Technologies, the California-based high tech manufacturer, has also shut down its Hong Kong operations.
Meanwhile FedEx, the US shipping giant, is transferring some regional jobs from Hong Kong to Singapore, while Steelcase, the office-furniture maker has already moved its executive team from Hong Kong to Singapore.
